Major US Stock Indexes Eliminate, Several Chinese Companies under Biden’s Ban

S&P Dow Jones Indices and FTSE Russell decided on Wednesday evening to remove more Chinese companies from their index after the latest US executive order prohibits domestic investment in companies suspected of ties to the Chinese military. The US index publisher has determined that 25 Chinese companies will be removed from its index on August 2, while FTSE Russell stated that it would remove another 20 Chinese companies from the index on July 28.

FTSE Russell stated that the decision was based on feedback from index users and stakeholders. This move is based on the extended ban signed by US President Biden on June 3, which may deepen the troubles encountered by Chinese companies listed in the United States. They are currently struggling to deal with the Chinese government’s efforts to control the technology industry and strengthen data security against comprehensive regulatory reviews.

In the past ten years, the US capital market has been the source of funds that Chinese companies yearn for, especially for technology companies. They hope that their valuations will catch up with their local listed peers and use a huge pool of liquid funds. However, in the past week, China has cracked down on several companies that wanted to go public in the United States through cyber security reviews. Ride-hailing giant DidiChuxing DIDI.N has become an obvious target. Just a few days ago, the company had just raised $4.4 billion on the New York Stock Exchange. After China ordered the removal of Didi’s mobile app from its mobile app store, Didi’s share price fell for the fourth consecutive day, closing down 5.9% on Thursday.

The stocks that will be removed from the related indexes of FTSE Russell and S&P Dow Jones Indices Co., Ltd. include aerospace-related companies such as Aerospace Rainbow and AVIC. FTSE Russell also listed China Heavy Industry, China Shipbuilding Defense, and Inner Mongolia Yiji. S&P Dow Jones Indices Co., Ltd. Listed AVIC., SZ and Northern Navigation. These individual stocks will be deleted from the FTSE Global Stock Index Series, FTSE Global Inclusion of China A-Share Index Series, and related indexes. Due to US sanctions, FTSE Russell has previously excluded Chinese companies, including SMIC and Hikvision, from its index. 

According to the previous executive order, S&P Dow Jones Indices Co., Ltd. had previously removed some Chinese stocks from its index, including Luokung Technology LKCO. The company said that under Biden’s new order, these companies are now eligible to re-enter its index.